Retirement Accounts: An Underrated Asset Protection Strategy
Perhaps your mother was right that, when trying to get others to see your point of view or do your bidding, you catch more flies with honey than you do with vinegar. Estate planning lawyers can attest, however, that while some people enter the law office with dreams of being generous to their descendants, an even greater share take the attitude of, “Keep your hands off of my money.” The idea of creditors gobbling up your estate during probate, when it is too late for you to do anything about it, is scary. Financial planners are happy to sell you all kinds of fancy strategies to make your property difficult to track down, but the most effective and most actionable asset protection strategies might be right at your fingertips, and you might already be engaging with them. If you have an employer-provided retirement account, you are in a stronger position than most, not least because the law protects retirement accounts from most creditor claims. To find out more about how your humble retirement account can bring your family robust financial security, contact an Orlando estate planning lawyer.
The Employee Retirement Income Security Act
Pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), the intended beneficiaries of an employer-provided retirement account are the employee and his or her family. Most of the time, creditors may not require you to take money out of employer-provided retirement accounts, including but not limited to 401(k) accounts and Roth IRA accounts. In the event that creditors are allowed to make these claims, they must leave enough money in the account to provide for the employee and his or her dependents. ERISA also imposes rules about the investment strategies that employer-provided retirement accounts can use; these accounts are not the place for risky investing.
When Is Your Retirement Account Not Safe From Your Financial Hardships?
In the event of a divorce, the court may issue a Qualified Domestic Relations Order (QDRO), which requires the fiduciary of your retirement account to pay a portion of it to your ex-spouse. QDROs have been getting a lot of publicity lately, as people above the age of 50 account for a disproportionate share of recent divorce filings, and also because Florida has recently abolished permanent alimony.
The most common reason that retirement account balances get smaller while the employee is still in the workforce is the employee himself or herself withdrawing money from the account. An increasing number of middle-aged employees with retirement accounts are withdrawing money from them, even when this means incurring a financial penalty. Many of these scenarios involve parents in their 50s or 60s withdrawing money from their retirement accounts to help their young adult children.
Contact Gierach and Gierach About Asset Protection as a Focus of Your Estate Plan
An estate planning lawyer can help you protect your assets without resorting to paranoia or outrageously expensive strategies. Contact Gierach and Gierach, P.A. in Orlando, Florida to discuss your case.
Source:
dol.gov/general/topic/retirement/erisa#:~:text=The%20Employee%20Retirement%20Income%20Security,for%20individuals%20in%20these%20plans.
